We've already heard some of the Fool's best analysts' picks for the best drug stocks to own. Today, I'd like to present one of the most promising development-stage drugmakers for the coming years.

The story on Pain Therapeutics (NASDAQ:PTIE) has changed dramatically since David Nierengarten last profiled it on the Fool in 2005. Pain's lead drug candidate, opioid pain treatment Oxytrex, has been hung up in phase 3 testing after posting mixed study results two years ago, and another late-stage drug candidate has failed clinical testing.

Despite these setbacks, Pain Therapeutics reinvented itself with a lucrative development deal it signed with King Pharmaceuticals (NYSE:KG) for potential abuse-resistant pain drug Remoxy. The drug is now in phase 3 testing and has great odds of eventually gaining marketing approval.

No phase 3 study is a sure thing, but ...
One of the most commonly prescribed drugs for chronic pain sufferers is privately held Purdue Pharma's OxyContin, which had sales of almost $2 billion in 2005. Unfortunately, thousands of people choose to recreationally abuse OxyContin and other opioid pain relievers every year, sometimes by crushing the drug or dissolving it in alcohol.

Pain Therapeutics can help prevent this abuse. The active ingredient in OxyContin is the opioid compound oxycodone; Pain's Remoxy is designed as a harder-to-abuse version of the same drug.

Remoxy is currently in a 400-person phase 3 study that should be completed sometime this year with study results announced several months after the trial's completion. The beauty of this clinical trial, and why it almost has to succeed, is that the drug is being tested against placebo, and the study's primary endpoint is reduction in pain over a three-month period.

In other words, an already proven opioid pain reliever, oxycodone, plus an abuse-resistant component, are being tested against placebo to see which compound makes people feel better. Guess which arm of the trial will come out ahead in improving patients' pain levels?

To ensure the FDA's happiness with Pain Therapeutics' moves to stack the Remoxy trial so greatly in its favor, Pain secured what is known as a Special Protocol Assessment (SPA) with the FDA for the study. An SPA signifies that the FDA is satisfied with how the study's design will prove the drug's efficacy. In other words, the FDA is fine with Pain testing Remoxy against placebo in the phase 3 study, which should nearly guarantee that the drug is a success on the efficacy side of things.

No goldmine is without risks
Even with this high probability for success, the Remoxy trial is not without risks. The first is stems from the very same reason why the trial has such a good chance to be successful -- its placebo group.

All sorts of statistical issues start to pop up once patients begin dropping out of a study in large numbers. In a clinical trial in which some chronic pain sufferers are given a placebo for twelve weeks, there is bound to be a large dropout rate. This is a common issue with pain studies,, and one that Pain Therapeutics and its contract research organization are surely aware of, but it's a risk nonetheless. It's also what (at least temporarily) derailed one of Pain's other compounds two years ago.

The big risk for Remoxy comes on the patent litigation front, with competitor Purdue Pharma and its OxyContin compound. Pain Therapeutics CEO Remi Barbier has some pretty convincing arguments about why Remoxy doesn't infringe on Purdue's patents (the last of which expires in 2013). But because Pain and King will be filing for marketing approval via the 505(B)(2) regulatory pathway, they are subject to up to a thirty-month FDA stay of action on their marketing application if Purdue tries to delay things and take them to court for patent infringement. If Purdue does challenge Remoxy in court, it should only stall the drug's approval and marketing at worst.

It's also worth mentioning that not everything is perfect with Pain Therapeutics. The company has failed in the development of, or shelved clinical trial work on, several compounds in the past. It's also made a habit of not sticking to its previously guided drug development timelines. Even with the past delays, though, Pain gets cut a little slack; it's a small specialty pharma, and unexpected events happen all the time in the drug development process.

The final risk worth mentioning comes with Pain's partner, King Pharmaceuticals. A disinterested partner, or one with a different marketing strategy for a compound, can cause all sorts of problems. Just look at what's occurring with Nektar Therapeutics (NASDAQ:NKTR), marketing partner Pfizer (NYSE:PFE), and their inhalable insulin product Exubera.

A pain-free future?
To paraphrase a certain former Secretary of Defense, with a development-stage drug company such as Pain Therapeutics, there are known knowns, known unknowns, and unknown unknowns. No drugmaker is free from all these different types of risks, but at least Pain Therapeutics has taken much of the clinical trial risk for its lead compound out of the equation, and won't require a wing and a prayer to get FDA marketing approval of Remoxy.

Pain Therapeutics will receive a 15% royalty rate on all Remoxy sales up to $1 billion. If you subtract Pain's $210 million in cash and securities on hand and modest operating expenses, and assign a conservative 20 times P/E ratio to its earnings, partner King only needs to generate $250 million in Remoxy sales to support Pain's current market capitalization.

With such a low level of Remoxy sales baked into its share price, and minimal clinical trial risk, investors who consider Pain Therapeutics around today's share price won't be hurting in the long run, if you assume there will be a viable market for abuse-resistant opioids.

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Fool contributor Brian Lawler hopes for a more pain-free future for himself. He owns shares of Pain Therapeutics but no other company mentioned in this article. Pfizer is an Inside Value selection. The Fool has a disclosure policy

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.